This blog was published by the OECD
Industrial policy spending across 20 countries has grown, but not by as much as the debate suggests. More importantly, support tends to flow to sectors losing competitiveness rather than gaining it. This blog explores why, and what it means for policymaking.
Although much of the debate around industrial policy focuses on its effectiveness and its potential distortive effect, and whether governments are spending too much or not enough, new analysis covering 20 countries points to other important questions: is the money going to the right places, and, once it starts, does it ever stop flowing?
Industrial policy spending is growing, but not dramatically
Across 20 countries, total support through grants and tax expenditures rose from 1.34% of GDP in 2019 to 1.55% in 2023, an increase of about 16%. Grants drove most of the growth, with increases going primarily to fixed capital investment, the green transition and lowering energy costs for businesses. While meaningful, it is far from the spending surge that policy debates might suggest. Financial instruments such as loans, guarantees, and government venture capital held broadly stable. But if the pot is not growing dramatically, what matters more is where it is going. And that is where the picture gets more nuanced …
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